Question

The trial balance before adjustment of Culver Inc. shows the following balances.

		Dr.		Cr.
Accounts Receivable		$77,400
Allowance for Doubtful Accounts		1,505
Sales Revenue (all on credit)				$584,800

Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 5% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,700 credit balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

SOLUTION: A
	CALCULATION OF ALLOWANCE ACCOUNT ON THE BASIS OF % OF ACCOUNT RECEIVABLE
	Account Receivable	$                  77,400
	Estimated uncollectable	4%
	Estimated amount of uncollectable	$                     3,096
	CALCULATION OF BAD DEBT EXPENSES OF THE YEAR
	Estiamted amount of uncollectable of the year	$                     3,096	Credit
	Add: Allowance for Doubtfull Debts (Opening Bal.)	$                     1,505	Debit
	Balance need to be make entry of Bad Debt	$                     4,601	Credit
	Bad debts expenses recognise in the year =	$                     4,601
Journal Entries
Transaction	Account Title and explanation	Debit	Credit
1	Bad Debt Expenses	$                     4,601
	Allowance for Doubtful Account		$                       4,601
	(To record the bad debt Expenses)
SOLUTION: B
	CALCULATION OF ALLOWANCE ACCOUNT ON THE BASIS OF % OF ACCOUNT RECEIVABLE
	Account Receivable	$                  77,400
	Estimated uncollectable	5%
	Estimated amount of uncollectable	$                     3,870
	CALCULATION OF BAD DEBT EXPENSES OF THE YEAR
	Estiamted amount of uncollectable of the year	$                     3,870	Credit
	Less : Allowance for Doubtfull Debts (Opening Bal.)	$                     1,700	Credit
	Balance need to be make entry of Bad Debt	$                     2,170	Credit
	Bad debts expenses recognise in the year =	$                     2,170
Journal Entries
Transaction	Account Title and explanation	Debit	Credit
1	Bad Debt Expenses	$                     2,170
	Allowance for Doubtful Account		$                       2,170
	(To record the bad debt Expenses)